UK faces tax hikes or cuts to public services in bid to hit defence spending target, IFS warns

British Chancellor of the Exchequer Rachel Reeves poses outside 11 Downing Street ahead of presenting the Spring Forecast to Parliament, in London, Britain, March 3, 2026. REUTERS/Toby Melville - (Reuters)

Economists have warned the government faces a stark choice: tax hikes or deep cuts to public services, to fund a required boost in defence spending.

Amid intensifying calls for greater defence investment due to the Middle East conflict, the Institute for Fiscal Studies (IFS) said meeting Nato’s 3.5% of national income target would cost an additional £35 billion annually. This figure, significantly more than the UK's current 2.4% allocation, is equivalent to the combined budgets of the Ministry of Justice and the Home Office.